Page 280

Sample Intel Oct $130 Call Option Quote (INQJF)

Call Options

Ford stock is trading at $50 per share today and you believe (or you just hope) that it will rise in near term. How could you profit from this speculation? The simplest approach of course would be to buy it. Let’s say 200 shares which would work out to

200 x $50 per share = $10,000

Now if the stock rises to $60 per share your gross profit would be $2,000 or 20%. Not a bad profit margin but let’s take a look at some of the pros and cons here.

First off, you would have to come up with the $10,000 to buy the stock. Of course if you have $5,000 available you could buy the rest on margin, but based on our margin discussion there are certain drawbacks associated with it. The upshot is that if the stock does not go …